Monday, April 16, 2007

Calls of Note Part 2

- ThinkEquity is upping their tgt on Sigma Designs (NASDAQ:SIGM) to $40 from $30 based onwhat we believe to be ongoing strong design wins and deployment activity. Firm only sees one major threat to this story, and that is competition. Fortunately, they believe the design wins already won by SIGM should be able to drive the stock materially higher for another 12 months.

Firm is increasing their FY08 and FY09 revenue estimates from $139M and $180M to $159M and $205M. For the same time periods, they are increasing their untaxed EPS estimates from $1.18 and $1.56 to $1.52 and $1.97.

As for the estimates, the firm caution that they do not know what the gross margins or any other expense/income items below the revenue line have been in the last few quarters. As such, they fear that their historical estimates may be adjusted downwards once they obtain the full information. Firm estimates the current fully diluted market cap to be close to $728M based on 28M shares. With cash being nominal, they call that a $700M enterprise value. They believe the stock should trade at close to $1.1B plus the cash, or $40 per share, a year from now.

The driver for the stock over the last five quarters has been IPTV in the form of set-top boxes from companies such as Motorola. Firm believes this will continue to be the main driver for the next 12 months, but that it will also be augmented by strong design wins in other areas, including digital media adapters (DMAs), DVD players (Blu-Ray), portable media players (PMPs) and TV sets.